I have created a series of map templates for one of our departments that each have an associated model.

As part of the model I also created a lyr file for symbology and labeling (the subject parcel layer portion).

This is referenced in the output feature parameters of my model.

The tool runs correctly and the Subject Parcel_layer gets added to the map template. The overall symbology from the layer file is correct, however, the labeling preferences I've set up are not (font size, type, etc.)

As a side note, the Subject Parcel Layer does not exist in the template, it gets added through the model.

I'm not clear on your entire process but I would expect Properties set on the Labels tab while authoring the layer you save as a layer file to be honoured. If you have not reviewed this page from the help it may or may not offer alternatives to what you have already tried. Have you tried adding the layer file referenced in the Layer Symbology tab of the Subject Parcel_layer Properties to a Blank Map to ensure the Label Properties saved therein are what you thought?
– PolyGeo♦Apr 19 '13 at 22:42

Opening up the layer file in a new ArcMap session gets the results I would expect
– CraigApr 22 '13 at 13:10

I can replicate this issue in 10.2.1, I guess it is a bug. Even when I just use the Apply Symbology tool the labelling never shows.
– HornbyddOct 19 '15 at 22:46